Q1 2024: SAS reaches milestones in the Chapter 11 process and prepares for a busy summer season

I am pleased to conclude a busy first quarter and winter season for SAS, marked by increased passenger volumes, and several exciting new projects and destinations. We are pleased to see that more and more people choose to travel with SAS, which clearly confirms that our ramp-up efforts continue to be successful.

We are getting ready for the summer season, during which SAS will fly to over 130 destinations in more than 40 countries. We have added frequencies to popular destinations across Europe, and nine new European destinations. We will also increase flights to North America and Asia in the summer program by adding flights to popular destinations such as New York and Tokyo. Furthermore, we have expanded the summer program to include Atlanta in the North American network, with daily direct flights throughout the summer season. We look forward to flying our passengers to their summer destinations.

SAS aims to be a driving force in sustainable aviation and in January, we announced a new collaboration with Airbus, Swedavia, Vattenfall and Avinor, to jointly investigate the feasibility of infrastructure for hydrogen-fueled aircraft at airports in Norway and Sweden, with the goal to develop a framework for the rollout of hydrogen-powered flights. This partnership is an important step in driving the transition towards achieving net-zero emissions.

We are making steady progress in our Chapter 11 process in the US and in reaching our overall targets in the SAS FORWARD plan. In November, we entered into an investment agreement with the winning bidder consortium in our exit financing solicitation process, consisting of Castlelake, Air France-KLM and Lind Invest, together with the Danish state. The agreement entails a total investment in the reorganized SAS corresponding to approximately SEK 13.2 billion. We currently aim to receive approval by the US court for the Chapter 11 plan in the first quarter of 2024, followed by regulatory approval and a likely Swedish company reorganization at the SAS AB level. As a result of that process, we repeat the expectation that there will be only a modest recovery for general unsecured creditors, no recovery for subordinated creditors and no value for SAS AB’s existing shareholders, and that all of SAS AB’s common shares and listed commercial hybrid bonds will be cancelled, redeemed and delisted, in connection with emergence from the Chapter 11 process. Any payment of recoveries to creditors will be made only after the completion of the transaction and the fulfilment of any conditions for payment to creditors. We currently expect to emerge from the restructuring proceedings around the end of the first half of 2024.

NOVEMBER 2023 – JANUARY 2024

• Revenue: MSEK 8,923 (7,896)
• Income before tax (EBT): MSEK -1,070 (-2,449)
• Income before tax and items affecting comparability: MSEK -1,032 (-2,451)
• Net income for the period: -1,453 (-2,709)
• Earnings per common share: SEK -0.20 (-0.37)

SIGNIFICANT EVENTS DURING THE QUARTER

• On Nov. 4, SAS entered into an investment agreement with the winning bidder consortium and a DIP term loan agreement with Castlelake.
• On Nov. 15, SAS repaid its original DIP term loan.
• On Nov. 29, the European Commission announced that the recapitalization of SAS in 2020 complied with state aid rules and was thereby approved.
• On Jan 2, SAS announced over 130 destinations in more than 40 countries for the summer season 2024.
• On Jan. 23, SAS published updated financial projections for the reorganized SAS. SAS currently targets to receive court approval of the Chapter 11 plan in the first quarter of 2024 followed by regulatory approval and a likely Swedish company reorganization at the SAS AB level. SAS currently expects to complete the restructuring proceedings around the end of the first half of 2024.
• SAS expects that there will be only modest recovery for general unsecured creditors, no recovery for subordinated unsecured creditors and that there will be no value for SAS AB’s existing shareholders upon emergence from the restructuring process. All of SAS AB’s common shares and listed commercial hybrid bonds are expected to be cancelled, redeemed and delisted.

SIGNIFICANT EVENTS AFTER THE QUARTER

• On Feb. 5, SAS filed a second amended Chapter 11 plan and a related disclosure statement with the US court. The Chapter 11 plan obtains support of the Official Committee of Unsecured Creditors.

OUTLOOK

• The first quarter interim report includes financial projections on page 10.

QUARTERLY RESULTS

We observed continued healthy passenger demand through the first quarter with the total number of passengers up 6.3 percent compared with the same period last year. Year-on-year, our RPK increased 13.3 percent, while capacity increased 9.3 percent. Our flown load factor for the quarter was 71.8 percent, up 2.6 percentage points compared with the same period last year.

The increase in passenger demand and capacity led to a year-on-year increase of 13 percent in our total operating revenue, which landed at SEK 8.9 billion for the quarter. Earnings before tax ended at a negative SEK 1.1 billion, representing a year-on-year improvement of SEK 1.4 billion.

Cost reductions across the business remain in focus to secure our cost competitiveness, and total operating expenses for the quarter ended at SEK 10.1 billion. Many of the cost efficiencies of the SAS FORWARD plan are ramping up over time, and some have been implemented but cannot be recognized in our financial results until after emergence from Chapter 11, including cost savings from the fleet restructuring.

The cash balance at the end of the quarter was SEK 5.3 billion. Cash flow from operating activities during the quarter amounted to an outflow of SEK 38 million.

NEW ROUTES AND DESTINATIONS

As part of SAS’ strategy to strengthen our offering for Scandinavian travelers, and to adapt to the relative increase in demand for leisure travel, SAS has announced several new routes during the quarter. We are getting ready for the summer season, and in early January we were pleased to announce that SAS will fly to over 130 destinations in more than 40 countries this summer. We have added frequencies to popular destinations across Europe, and we have added nine new European destinations, including direct flights to Ibiza, and Tivat on the coast of Montenegro, among others. We will also increase flights to North America and Asia in the summer program by adding frequencies to popular destinations such as New York and Tokyo.

We have also expanded the summer program to include Atlanta in the North American network, with daily direct flights throughout the summer season. With almost 94 million passengers passing through in 2022, Hartsfield-Jackson Atlanta International Airport is the world’s busiest and most efficient airport. Cargo transportation is expected to play an important role for this route, partly because of its proximity to the Port of Savannah, the largest and fastest-growing container terminal in America. This also means an expanded offering for SAS passengers, who can look forward to reaching several new and exciting destinations across the Southern USA, Caribbean and Latin America, all conveniently accessible from Atlanta.

Furthermore, SAS has added frequencies between Stockholm and Skellefteå, due to the increasing growth in the Skellefteå region. From April 8, SAS will offer new frequencies on the busiest business travel days. Expanded air traffic plays a crucial role in the region’s ongoing expansion, and we are proud to provide businesses and residents of Skellefteå with opportunities to connect with the world.

In February, after the end of the quarter, we launched the concept Destination Unknown, which entails SAS inviting EuroBonus members to embark on a mysterious journey. On April 5, SAS EuroBonus members will meet at Copenhagen Airport ready to board a mystery trip. The travelers are invited to explore the concept of flying to an unknown destination and join a unique adventure curated by SAS. We were pleased to be met by great interest for this concept, and more than 1,000 members signed up for the chance to embark on the mystery journey within minutes. The allure of the unknown destination will keep travelers on the edge of their seats throughout the flight until the ­destination is revealed. All Destination Unknown tickets are biofuel tickets.

SAS was also awarded a three-year contract extension with Equinor in February, for both domestic and international travel. The contract with Equinor represents a significant contribution to SAS’ passenger volume in Norway. SAS was chosen on the basis of an extensive network, attractive timetable, commercial terms and one of Europe’s most modern fleets. We are delighted that Equinor once again have chosen SAS as their preferred carrier for business travel, demonstrating a continued confidence in us for the next three years.

UPDATE ON SAS’ TRANSFORMATION PLAN

We launched our comprehensive business transformation plan SAS FORWARD in conjunction with the publication of the first quarter report for FY 2022, in the end of February 2022. The aim of the plan is to secure long-term competitiveness for SAS in the global aviation industry. On July 5, 2022, to accelerate the implementation of SAS FORWARD, we announced that we had voluntarily filed for Chapter 11 in the US, a well­established and flexible legal framework for restructuring businesses with operations in multiple jurisdictions. Through this process, we aim to reach agreements with key stakeholders, restructure the company’s debt obligations, reconfigure our aircraft fleet and emerge with a significant capital injection.

During the quarter, in November, we entered into an investment agreement with the winning bidder consortium in our exit financing solicitation process, consisting of Castlelake, Air France-KLM and Lind Invest, together with the Danish state. The agreement entails a total investment in the reorganized SAS corresponding to approximately SEK 13.2 billion, including approximately SEK 5.2 billion in new unlisted equity and approximately SEK 8 billion in secured convertible debt. As part of the transaction, we have also secured new Debtor-in-Possession (“DIP”) financing of SEK 5.5 billion from Castlelake. The funds from the new DIP financing agreement are being used for, among other things, refinancing SAS’ original DIP term loan, increasing liquidity, and supporting SAS’ path to exit from its voluntary restructuring proceedings. The refinancing of SAS’ original term loan was completed in November.

As part of the transaction, SAS also intends to eventually exit the Star Alliance and join the SkyTeam Alliance, of which Air France-KLM is a founding member. Through the completion of this process and the opportunities presented by being part of SkyTeam, we will be able to further enhance SAS’ offerings for the benefit of our colleagues, customers and communities. This is a truly exciting step for SAS. However, it is important to note that nothing is changing as of now. SAS is still part of Star Alliance and our EuroBonus members will continue to enjoy their usual benefits when flying on our partner airlines. Members can continue to accrue and redeem points – just like today, and their benefits when they fly with SAS will not be impacted. The agreed exit transaction remains subject to approval in connection with the confirmation of our Chapter 11 plan of reorganization.

On February 5, 2024, SAS filed a second amended Chapter 11 plan and related disclosure statement with the US court. SAS also announced expected recoveries for creditors in the Chapter 11 process and that the Official Committee of Unsecured Creditors supports the Chapter 11 plan. The Chapter 11 plan and the disclosure statement remain subject to further amendments and court approval.

We currently aim to receive approval from the US court for the Chapter 11 plan in the first quarter of 2024, followed by regulatory approval and a likely Swedish company reorganization at the SAS AB level. As a result of that process, we repeat the expectation that there will be only a modest recovery for general unsecured creditors, no recovery for subordinated creditors and no value for SAS AB’s existing shareholders, and that all of SAS AB’s common shares and listed commercial hybrid bonds will be cancelled, redeemed and delisted, in connection with emergence from the Chapter 11 process. Any payment of recoveries to creditors will be made only after the completion of the transaction and the fulfilment of any conditions for payment to creditors. We currently expect to emerge from the restructuring proceedings around the end of the first half of 2024.

STEPS TOWARDS FOSSIL-FREE AVIATION

SAS aims to decarbonize aviation and progress on this ambitious plan can only be achieved through collaboration. By involving our customers and ­teaming up with them, we can reduce CO ₂ emissions and enable increased large-scale production of sustainable aviation fuels.

Several organizations joined SAS Corporate Sustainability Program (CSP) during the quarter. We were pleased to announce that Skellefteå City Airport becomes the first individual airport to join the CSP, and that SKEBO Skelleftebostäder AB becomes the first real estate company to join the CSP. The partnerships entail that the organizations will purchase environmentally friendly aviation fuel for all its business trips with SAS throughout FY 2024. We hope these partnerships will inspire other companies to join our CSP and be part of the journey to transform aviation for generations to come.

SAS has announced a new collaboration with Airbus, Swedavia, Vattenfall and Avinor, to jointly investigate the feasibility of infrastructure for hydrogen-fueled aircraft at airports in Norway and Sweden. Hydrogen is expected to become a significant fuel source for aviation in the future, and the goal of the collaboration is to develop a framework for the rollout of hydrogen-powered flights. By partnering with some of the strongest and most innovative players in the industry, we are assuming our responsibility to drive the transition towards achieving net-zero emissions. This is a journey that matters not just for SAS, but for the entire aviation industry.

On January 23, we also launched the EuroBonus Conscious Traveler program. The new program enables EuroBonus members to make conscious choices when traveling with SAS – while getting rewarded for it. At the heart of Conscious Traveler lies a single goal; the involvement of our customers in the journey toward net zero emissions. The launch of EuroBonus Conscious Traveler is a contribution toward the industry target of net zero CO₂ emissions by 2050 – perhaps our most important journey yet. We look forward to following the impact of the program throughout the year.

LOOKING FORWARD

I am pleased to conclude a busy winter season for SAS, marked by increased passenger volumes, and several exciting new projects and destinations.

We continue our work toward completing our Chapter 11 process in the US, and toward reaching the objectives in the SAS FORWARD plan. The aim is currently to receive approval from the US court of the Chapter 11 plan in the first quarter of 2024, to be followed by obtaining regulatory approvals and the implementation of a Swedish company reorganization at the SAS AB level. While work still remains, I am pleased to see the substantial progress we are making to become a competitive and financially strong company.

I am grateful for the hard work my colleagues at SAS are doing to ensure that we take the best possible care of our customers, and to ensure that they get the quality service they expect from us. Thank you for all your efforts!

As always, we look forward to welcoming our customers on board our aircraft.

Anko van der Werff
President & CEO
Stockholm, March 7, 2024

Teleconference – Q1 2024
A teleconference and webcast for investors, analysts and media will be held at 10.00 AM CET. Anko van der Werff, President & CEO and Erno Hildén, Executive Vice President & CFO, will present and comment on the report. The presentation will be held in English.

Access via web link (no advance notification is necessary): https://ir.financialhearings.com/sas-q1-2024

Link to register for participation via telephone: https://conference.financialhearings.com/teleconference/?id=5002479

After registration you will be provided phone numbers and a conference/user ID to access the conference. You can ask questions verbally via the teleconference.

For further information, please contact:
SAS press office, +46 8 797 29 44
Investor relations, +46 709 977 070

SAS, Scandinavia’s leading airline, with main hubs in Copenhagen, Oslo and Stockholm, flies to destinations in Europe, USA and Asia. Spurred by a Scandinavian heritage and sustainability values, SAS aims to be the driving force in sustainable aviation and in the transition toward net zero emissions. We are continuously reducing our carbon emissions through using more sustainable aviation fuel, investing in new fuel-efficient aircraft and technology innovation together with partners – thereby contributing towards the industry target of net zero CO2 emissions by 2050. In addition to flight operations, SAS offers ground handling services, technical maintenance, and air cargo services. Learn more at https://www.sasgroup.net

This is information that SAS AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of Erno Hildén, at 08:00 a.m. CET on March 7, 2024.